Video Games

Will Xbox Win the FTC Trial? We Asked the Experts

If Microsoft had managed to create a video game as successful and beloved by gamers as Call of Duty, it wouldn’t have gone to court in late June. That’s the crux of the matter, according to economists, a San Francisco judge, and bystanders waiting with bated breath for the judge’s verdict.

“If Microsoft had made Call of Duty, we wouldn’t be here,” Judge Jacqueline Scott Corey told lawyers representing Microsoft and the FTC. A judge said last Thursday that the law requires people to create their own creative blockbusters rather than buying video games.

Corey plans to make a decision within two weeks on whether Microsoft can buy Activision Blizzard for nearly $70 billion. Most of the experts IGN spoke to believe Microsoft has a good chance of winning its lawsuit against the Federal Trade Commission, but those who disagree are a vocal minority. The FTC and Microsoft declined to comment.

Much of the FTC lawsuit rests on “Call of Duty,” or “shooting video games,” as the judge put it, and Microsoft didn’t single-handedly create the video game that paved the way for its success. is trying to acquire

Florian Ederer, an associate professor of economics at the Yale School of Business, told IGN that the key point about antitrust law is that “if you grow organically into a dominant player, you’re doing something wrong. I can’t say,” he explained. ”

“If you just make a great game and get a very dominant position in the market, it’s not illegal. That’s totally fine,” Ederer said.Sony’s god of war It was taken up in court as an essential success story.

Corey argued to the FTC that Microsoft’s acquisition could allow other game developers to do better. call of duty. she said: “I’m trying to understand why there’s so much focus on Call of Duty.” Isn’t there an argument that would force someone to come up with another good game of the year? I mean, Kotik started from nothing, but you did it, right? ”

The FTC responded: call of duty was particularly successful. Some describe it as a “unicorn”.

If you can gain a dominant position in the market just by making great games, it’s not illegal.that’s perfectly fine

According to a June survey of 1,000 PC and console gamers by investment bank Jefferies, 38% of those surveyed wanted to play games. call of dutyfollowed by fortnite (29%) and Mine Craft (29%).Majority (31%) were looking forward to future events call of duty Titles are the most common, followed by spiderman 2PlayStation Exclusive, 28%.

Xbox rebuttal: call of duty was not a unicorn.

Microsoft economist Dr. Liz Bailey said on stage this week that Call of Duty is nothing special, FTC economists’ definition of the market is too narrow to match reality, and Activision’s game if the merger goes through. claimed to be available. on more platforms. Bailey analyzed the market and said Nintendo is a competitor to PlayStation and Xbox.

Arguing that the market is large and the company’s exclusivity is low favors Microsoft, while arguing that the market is small favors the FTC.

Most of the analysts IGN interviewed agreed that a judge would likely rule in Microsoft’s favor and would be surprised to see a different outcome.

“We all know the FTC is very, very, very aggressive at the moment,” Ederer said. “Most people do not expect the FTC to succeed here.”

Under the Biden administration, the FTC has taken a more aggressive stance, suing Amazon in June for tricking customers into signing up for Amazon Prime.

“The FTC is not suing because it’s easy to win,” said Lee Hepner, legal counsel for the American Economic Liberties Project, an antitrust advocacy group. “They are filing lawsuits that foreshadow new heights of corporate dominance. Microsoft’s ambitions are 70 times bigger than Facebook’s acquisition of Instagram and a monopoly in the entertainment industry’s fastest-growing sector. It’s about creating.”

Not everything went the way Microsoft wanted. The UK blocked the merger in April, citing cloud gaming as a reason. The FTC continued this line at the hearing, saying that if consoles become obsolete in the future, they will be replaced by the cloud, where Microsoft has the upper hand.

The FTC also had some evidence on its side. Especially his two emails for 2019 and his 2021 from Xbox game studio head Matt Booty.

In 2019, Loot wrote to Xbox’s chief financial officer Tim Stewart said Microsoft could “put Sony out of business.”

“Content is the only moat we have,” Booty wrote in response to an email that was redacted from public view. He said the company will look back in 10 years and say it would have been worth spending $2 billion or $3 billion in 2020 to get ahead of its competitors.

Microsoft spokesman David Cuddy said in a statement last Monday, “This email is three and a half years old and 25 months before our acquisition announcement. This is something we never pursued. It refers to industry trends and has nothing to do with the acquisition.”

In a 2021 email, Booty wrote that Xbox has “no plans” to distribute original games to competitors’ streaming or subscription services.

Future Developments in the Xbox FTC Lawsuit

There was a tense moment in court, with the FTC and Microsoft arguing in closing remarks and the judge giving her thoughts.

“Judge, this merger is permanent,” FTC attorney James Weingarten reiterated on Thursday before starting to discuss how the deal would hurt Sony.

Corey interrupted him. “We don’t care about harm to Sony, we care about harm to consumers,” she said, calling for a break.

The FTC v. Microsoft hearing is just the first step in what could be a lengthy process, depending on the judge’s decision.

If the FTC loses the hearing, it may immediately appeal the judge’s decision and seek a stay of the court order. Even if the merger is complete, it may choose to continue its lawsuit against Microsoft.

As for Activision Blizzard, if the acquisition fails, there will be a $3 billion penalty, and if the acquisition goes through, Activision CEO Bobby Kotick will earn about $400 million. It will be.

The contract expires on July 18th. Microsoft and Activision could renegotiate if a judge rules against Microsoft and Activision. We have been covering the trial with great enthusiasm. And I will watch the judge’s decision carefully.

Shannon Liao is a video game journalist and former staff writer for The Washington Post, CNN, and The Verge. You can follow her on Twitter @Shannon_Liao and Substack.

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